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Why Is Cypress (CY) Up 0.4% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Cypress Semiconductor (CY). Shares have added about 0.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Cypress due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Cypress Q2 Earnings and Revenues Surpass Estimates

Cypress Semiconductor (CY) reported second-quarter 2019 non-GAAP earnings of 25 cents per share, beating the Zacks Consensus Estimate by a penny. However, the figure was down 7.4% sequentially and24.2% year over year.

Revenues of $532.2 million surpassed the Zacks Consensus Estimate by 0.07%. The figure was down 1.3% sequentially but up 4.8% year over year. It reflects the adjustment for the NAND business divestiture, which was completed on Apr 1, 2019.

During the quarter, the company experienced strength in most of the end-markets served, namely automotive & legacy.

Top Line in Detail

In Terms of Business Unit: Cypress reports in two organized segments, namely Microcontroller and Connectivity Division, and Memory Products Division.

MCD: This segment generated revenues of $354.2 million (67% of the total revenues), down 3.9% year over year but up 14.1% sequentially.

MPD: The segment generated revenues of $178 million (33% of revenues), down 30.4% year over year and 22.1% on a sequential basis.

In Terms of End Market: The company operates in three high-growth markets, namely IoT, Automotive and Legacy end markets.

IoT: The company generated 37.5% of revenues from this market, up 900 basis points (bps) sequentially and 340 bps year over year.

Automotive: This market generated 38% of its total revenues, up 130 bps from the first quarter and 720 bps from the year-ago period.

Legacy: Cypress generated 24.5% of revenues from this market, down 1030 bps sequentially and 1060 bps on a year-over-year basis.

Operating Details

In the second quarter, Cypress’ non-GAAP gross margin was 47%, down 40 bps sequentially but up 70 bps from the prior-year period.

Per the company, operating expenses were $185.3 million (34.8% of revenues), up 8.6% sequentially.

Non-GAAP operating margin was 20.4%, up 190 bps from the year-ago quarter and 70 bps on a sequential basis.

Balance Sheet and Cash Flow

At the end of the second quarter, cash, cash equivalents and short-term investments totaled $372.2 million compared with $285.1 million in the first quarter. Accounts receivables were nearly $267.8 million, up from $266.4 million in the first quarter.

Inventory grew to $335.3 million from $316.9 million in the first quarter.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

Currently, Cypress has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Cypress has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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